Today the RBA decided to cut interest rates by 25 basis points to 1.75% and as a result this pair plummeted 70 pips and closed below yesterdays open. RBA based its reason for the decision on various fundamentals, first the low inflation and the fact that the low interest rate will go in a long way to support demand for the AUD and in extension the traded sector of the economy which includes its manufacturing sector and credit. This is a major signals for the things coming ahead, given the fact that NZD and AUD are both commodity prices, both of them are trending in thin ice in my opinion and in the days to come, we shall even see a monetary policy taking a turn to the negative side with interest rates approaching zero or there about in a bid to rouse the economy and cause inflation. With this, let’s see what happened to the charts:
Daily Chart Analysis
From yesterday, there were signs that the pair was about to reverse with the formation of a strong bear candle in the 4HR chart, now with the crucial RBA news, the pair has formed a clear double tops as shown by the green rectangle in the chart above. USD is gaining ground and price action rebounded from the upper BB and is now trending in yesterday’s open. Indicators on the daily chart remain flat although the stochastics are around the overbought region while OBV remains flat and nothing much can be deduced from it.
Fundamentals are providing leads on the short-medium term direction of this pair, given what happened earlier today to the AUD, we expect further easing in the coming few days. China in particular is experiencing a slow down and with today Caixin Manufacturing PMI 49.4 from last month’s 49.7- we shall expect this pair to go down till solid improvements take place in the commodity markets. Today, we shall also have to watch the NZD Unemployment rate set to be released towards the end of the New York Session and is projected at 5.5% from last month’s 5.3%, this will provide further hindsight on the state of the economy and contribute to data which is much needed by the RBNZ as stated last month.
4HR Chart Analysis
Technically speaking, we are now in the right left of the M-formation or a double top with strong supporting indicators for a down turn. Both stochastics are moving from the overbought regions with clearly reducing volumes as shown by the OBV. We shall be watching this pair closely and with further data expected later today, our indicators strongly pointing to a further USD strengthening.
15 Min Chart Analysis
Starting off yesterday, this pair was ranging within a 50 pip channel-opening at 0.6977 and closing at around 0.7030. I had also pointed out that we should be looking to short this pair at all highs only with the right indicator combination and even though there were not so strong short signals, only strong buy signals at the beginning of the European session in this time frame, opportunities were available in the 5 minutes. The Asian session trended higher and hit the 161.8 Fibonacci extension before the RBA news. Today look to short at all highs again as we watch out for the GDT Price index set to be released in the New York Session and then the unemployment rate at 1045PM GMT.